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  • Yongye International: Why This Stock's Story Is Too Good to Be True [View article]
    BTW I am not long nor am I short. I am merely pointing out that the company is not as big of a value as people think. You will get earnings growth, but you are unlikely to get multiple expansion.
    Feb 10, 2011. 06:50 PM | 2 Likes Like |Link to Comment
  • Yongye International: Why This Stock's Story Is Too Good to Be True [View article]
    Was away for a while, but let's address some of the things you brought up:
    - "It currently costs a little over $2 for a very highly concentrated bottle of Yongye plant product."

    I was using RMB, so we are in the same ballpark.

    - "The other main reason is that a 10-30% increase in yield is a huge economic deal to a farmer."

    10-30% is comparing Shengmingsu with nothing. What matters is whether the yield is different to a regular fulvic acid formulation. I have spoken to farmers in 6 different provinces in China. The differences between Shengmingsu and regular Fulvic acid is 0-2% at best.

    - "fulvic acid formulations are not a commodity (There are important fulvic acid quality and formulation contents variations)"

    We have contracted a lab to conduct a chemical analysis of Shengmingsu and it is primarily Fulvic acid. The other components are also regularly used commodity fertilizers. If you bought the components yourself you can mix your own Shengmingsu and it will cost you RMB2.50/acre vs. RMB12.00/acre

    It cost us less than US$100 to conduct this analysis in China. Do you think Chinese farmers are that dumb?

    - "by a vast amount, most farmers aren't using a fulvic acid product yet and Yongye is the leader in this niche in China, in terms of market share and product quality"

    that is true. Fulvic acid penetration is relatively low and explains the growth rate, but does not change the fact this is a COMMODITY BUSINESS that deserve a low multiple.

    - "Also, due to now producing their own humic acid and having their own coal source soon, margins figure to improve significantly"

    this is irrelevant. coal and fumic acid are both commodities. if they can make fumic acid or get coal cheaper than everybody else, THEY SHOULD SELL THE COAL. This is a common misconception about "vertical integration". If you are buying a commodity to make are commodity, you are just transferring from one pot into another.

    - you didn't say this (another commenter), but I might as well address it here "as far as being a commodity, so is every product from Johnson and Johnson, Exon and thousands of other companies. Delivery is the key. Ever heard of bottled water"

    A chemical that is purchased by professionals cannot be compared with a consumer product where you can differentiate via branding. Farmers are not concerned about the brand. Do you think they can sell their vegetables at a higher price because they used Shengmingsu vs. a generic?
    Feb 10, 2011. 06:41 PM | 2 Likes Like |Link to Comment
  • Yongye International: Why This Stock's Story Is Too Good to Be True [View article]
    The bulls that have come out of the woodwork are focused on the unimportant and unsubstantiated parts of Mr. Bezek's argument, but makes no reply to the most important part of his skepticism.

    It's not whether the company is a fraud or even if fulvic acid actually works or not. The most pressing concern that no one has addressed so far is that Fulvic Acid is a commodity. Shengmingsu is not a new miracle drug. YONG charges are huge premium for a commodity by using some clever marketing (my checks have indicated Shengmingsu costs 12.00/acre vs. 2.50/acre for a non-branded fertilizer). It may be able to get away with it in the short run, but eventually competitors will come in and compete away the price.

    The current valuation of 6x P/E sounds just about right.
    Feb 9, 2011. 02:59 AM | 1 Like Like |Link to Comment
  • The Truth About Yongye International (Part 2) [View article]
    Logical fallacy after logical fallacy. I suggest the author read these articles:

    and many many more....
    Feb 24, 2011. 11:08 AM | Likes Like |Link to Comment